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Taxes
 3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Taxes

NOTE 10 — Taxes

 

Income tax expense during the three months ended March 31, 2016 and 2015, and the deferred income tax amounts shown on the Company’s Balance Sheets, is related entirely to the deferred tax liability on the portion of the Company’s goodwill amortized for tax purposes. Due to the indefinite characteristic of this deferred tax liability, it cannot be offset against deferred tax assets. As a result, the Company recognized deferred tax expense of $7,985 in each of the three month periods ended March 31, 2016 and 2015.

 

At December 31, 2015, the Company has an unrecognized tax benefit of approximately $754,000, which did not change significantly during the three months ended March 31, 2016. Future changes in the unrecognized tax benefit are unlikely to have an impact on the effective tax rate due to the full valuation allowance recorded on the Company’s deferred tax assets, as realization of the deferred tax assets is dependent upon future taxable income.

 

The Company has not consistently generated taxable income in any jurisdiction for the prior 12 quarters.  Currently, the Company has maintained a full valuation allowance for all deferred tax assets due to negative evidence outweighing the positive evidence.  The primary negative evidence includes the Company’s history of losses, the phase out of the SoMo product line with diminishing revenue for 2016, and no contractual commitment assuring future revenue except for the remainder of SoMo related orders for OEM customers.  However, the Company’s short term trend of net income for the last two years allows for the possible reversal of existing taxable temporary differences.  If the Company continues to remain profitable and determines that the positive evidence outweighs the negative evidence, projected future taxable income could be included in the evaluation.